Why Doesn't the IRS Take Visa?

On Wednesday, the Wall Street Journal reported that the IRS would accept MasterCard, Discover, and American Express cards for 1999 tax payments. Why not Visa?

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When you buy something, you generally pay the same price whether you use a credit card or pay with cash. But for every credit card transaction, the merchant pays a small fee--usually 1 percent or 2 percent of the purchase amount--which goes to the credit card company, the bank that issued the card, and others. For example, if you pay cash for $100 worth of groceries, the supermarket gets the full amount; but if you pay with a credit card, it has to fork over a dollar or two in fees, depending on which card you use.

The IRS is prevented by law from paying such fees, since they would decrease tax revenue. So taxpayers who use a credit card will have to pay it themselves. Since Visa contracts only with merchants that do not charge more to its cardholders than to those who pay with cash or a check, the company chose not to participate in the IRS's program.

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